Senate Finance Committee releases tax provisions of Build Back Better Act

By Paul Bonner

The Senate Finance Committee released its portion of the Build Back Better Act on Saturday containing tax provisions and other updated legislative text.

In an announcement, committee Chair Sen. Ron Wyden, D-Ore., said the committee had made "targeted improvements" in the 1,180-page portion of the act, which was passed in its entirety by the House on Nov. 19 (H.R. 5376; see prior coverage of its tax and other provisions).

Senate committees of Commerce, Small Business, Banking and Housing, and Veterans Affairs also are among committees that have released their portions of the Senate version of the Build Back Better Act, Senate Majority Leader Chuck Schumer, D-N.Y., said last week.

Besides revenue, the Senate Finance Committee's title (Title XII of the bill) includes provisions on nontax matters including paid leave, health care, the environment, higher education, and trade.

Wyden said his committee modified the House's text of the bill with technical and policy changes plus changes to comply with Senate budget rules. The chamber's parliamentarian has yet to weigh in on rules compliance.

No SALT change — yet

One thing that is not in the Senate version is any change in the current (through 2025) cap on itemized deductions of state and local taxes under Sec. 164(b). The House version would increase the current $10,000 limit to $80,000 ($40,000 for married taxpayers filing separately and trusts and estates).

Changes may be made on the Senate floor later, including by an amendment adding a SALT provision (which was also added by amendment in the House).

Corporate minimum tax

Like the House version, the Senate text includes a 15% minimum tax on profits of large corporations. Corporations (other than S corporations, regulated investment companies, or real estate investment trusts) with more than $1 billion in average annual adjusted financial statement income for the three-tax-year period ending with the tax year would be liable for a tax of 15% of adjusted financial statement income for the tax year (over the corporate adjusted minimum tax foreign tax credit for the tax year). The provision has drawn criticism from groups including the AICPA, which asked that it not be included in the bill as overly complex and, because of differences between financial and taxable income, prone to causing distortions of both concepts.

Child tax credit

Also like the House version, the Senate text extends the 2021 expansion of the child tax credit through 2022 and also extends advance payments of the credit monthly through 2022. It also would extend the greater refundability of the credit beyond 2022.

Earned income tax credit

The Senate text, like the House bill, includes an extension of the 2021 changes to the earned income tax credit through 2022. The increase in the earned income and phaseout amounts would be indexed for inflation in 2022.

High-income taxpayers

Like the House version, the Senate bill would impose an income threshold that curtails some tax benefits and imposes new tax liabilities on income above those amounts.

  • Small business stock: The legislation also would modify Sec. 1202, which provides a gain exclusion for stock of qualified small businesses if held for more than five years, by disallowing 75% and 100% exclusions for taxpayers with adjusted gross income (AGI) over $400,000 or for trusts or estates.
  • Net investment income tax: The bill would expand the reach of the Sec. 1411 net investment income subject to a surtax of 3.8% of certain high-income taxpayers (taxable income over $400,000 for single filers and $500,000 for married couples filing jointly) to include income derived in the ordinary course of a trade or business.
  • Surcharge on high-income individuals, estates, and trusts: A new Code Sec. 1A would impose a tax on modified AGI over $10 million of 5% for individuals ($5 million for married taxpayers filing separately) and $200,000 for an estate or trust, plus 3% of modified AGI over $25 million for individuals ($12.5 million for married taxpayers filing separately) and $500,000 for an estate or trust.

International tax provisions

Several provisions would affect international business transactions and entity structures. They include modifications to Sec. 245A regarding the deduction for foreign-source portions of dividends, a limitation under Sec. 954(d) on foreign base company sales and services income, and a range of provisions concerning inbound transactions, such as modifications to the Sec. 59A base-erosion and anti-abuse (BEAT) tax.

Green energy incentives

As part of its incentives for renewable and cleaner energy and fuel sources and transportation and to reduce carbon emissions, the bill would provide a wide variety of new or extended production and investment credits and depreciation allowances.

Passage in 2021?

Schumer stated on the Senate floor last week that he intends for the chamber to pass Build Back Better by Christmas. If the Senate version of the bill differs from the version passed by the House, it will then have to go back to the House for reconsideration.

— To comment on this article or to suggest an idea for another article, contact Paul Bonner at

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